Gold Prices Forecast: Powell’s Remarks Key to XAU/USD Outlook

Highlights

• Spot gold climbs 0.3%, set for third weekly gain.
• October data influences Fed rate cut speculation.
• Treasury yields modestly up, reflecting Fed bets.
• Markets await Powell’s impact on gold’s path.

Gold Prices Surge Amid Rate Cut Bets

Gold (XAU/USD) prices are poised for a third consecutive weekly gain, buoyed by indications of cooling inflation and growing expectations of a U.S. rate cut. Spot gold increased by 0.3% to $2,042.58 per ounce early Friday, marking an approximately 2% weekly rise. U.S. gold futures mirrored this trend, also up by 0.3%.

Inflation and Federal Reserve Policies

Recent data revealed a moderate rise in U.S. consumer spending for October, coupled with the smallest annual inflation increase in over two and a half years. These developments are influencing market speculation about the Federal Reserve’s upcoming moves, including the potential end to interest rate hikes and possible rate cuts.

Market Reactions and Treasury Yields

Traders are now more confident about an impending rate cut by the Federal Reserve, with CME’s FedWatch Tool indicating a 50% chance as early as March. This sentiment is further reflected in the Treasury yields, which saw a modest increase but remained lower than the previous month’s highs.

Interest Rate Outlook and Dollar’s Performance

Investors and market analysts are closely watching the Federal Reserve’s next steps, particularly in light of Fed Governor Christopher Waller’s recent remarks suggesting confidence in the current policy stance. With expectations of no change in benchmark interest rates at the Fed’s December meeting, the focus shifts to the central bank’s policy trajectory for the coming year. Concurrently, the dollar’s weakening position and the euro’s fluctuation amid inflation data are contributing to the changing market landscape.

Fed Chair Powell’s Upcoming Comments

Attention now turns to Federal Reserve Chair Jerome Powell’s upcoming comments, which are expected to significantly influence gold’s trajectory. While there is anticipation of further monetary policy tightening if inflation progress stalls, markets are largely pricing in a steady stance for the Fed’s December meeting. The European Central Bank’s data and rate cut expectations are also shaping investor sentiment, underscoring the interconnectedness of global economic indicators and monetary policies.

Short-Term Forecast

Amid signs of cooling inflation and a potential shift in Federal Reserve policy, gold prices are expected to maintain their upward trajectory in the short term. However, Federal Reserve Chair Jerome Powell’s upcoming comments could introduce volatility, influencing market sentiment and potentially impacting gold’s bullish trend.

Technical Analysis

With the current daily price of gold (XAU/USD) at 2040.20, it is comfortably positioned above both the 200-day and 50-day moving averages, set at 1945.70 and 1945.82, respectively. This positioning above the moving averages indicates a bullish trend in both the medium and longer-term outlook.

The price is nearing the minor resistance level at 2067.00, suggesting a potential test of this threshold. If it breaks through, it could signal continued bullish momentum. Conversely, the main support level at 1987.00 remains untested recently, reinforcing the current upward trend’s strength.

Overall, the market sentiment for gold appears bullish, given its performance above key moving averages and its approach towards the minor resistance level.